RICS Red Book Jan 2020 Flashcards

1
Q

When did the most recent RICS Valuation - Global Standards become effective?

A

The RICS Valuation - Global Standards was effective from:

Issued November 2019, effective from 31st January 2020

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What three forms do the Global Standards for Valuation take?

A

The three forms the Global Standards for Valuation take are:

Professional Standards - centred on ethics and conduct, underpinned by knowledge and competence

Technical standards – centred on common definitions and conventions, underpinned by consistent application through recognised approaches

Performance or delivery standards – centred on rigour in analysis and objectivity of judgment, backed by appropriate documentation and clarity when reporting.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is the RICS Valuation - Global Standard commonly referred to?

A

The RICS Valuation - Global Standard is commonly called:

RICS Red Book Global

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the RICS Valuation - Global Standards used for?

A

RICS Valuation - Global Standards are used for:

With its focus on practical implementation, RICS Valuation – Global Standards, commonly referred to as the RICS Red Book Global, applies the latest international standards and supplements them with additional requirements and best practice guidance that, when combined, provide the highest levels of assurance regarding professionalism and quality.

RICS Valuation - Global Standards are used by competent surveyors to produce valuations.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the aim of RICS Valuation - Global Standards?

A

The aim of RICS Valuation - Global Standards is:

The aim is simply stated – it is to engender confidence, and to provide assurance to clients and recognised users alike, that a valuation provided by an RICS-qualified valuer anywhere in the world will be undertaken to the highest professional standards overall.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are the mandatory professional standards?

A

The mandatory professional standards are:

PS 1 – Compliance with standards where a written valuation is provided
PS 2 – Ethics, competency, objectivity and disclosures.

Global professional and ethical standards as they expressly apply to valuers are denoted by the use of a PS reference number and are mandatory (unless otherwise stated) for all members providing written valuations. They define the parameters for compliance with the Red Book Global, including adoption of the International Valuation Standards; set out the associated RICS regulatory requirements; and clarify the detailed application of the RICS Rules of Conduct when members are undertaking valuation work.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are the mandatory valuation, technical and performance standards?

A

The mandatory valuation, technical and performance standards are:

VPS 1 – Terms of engagement (scope of work)
VPS 2 – Inspections, investigations and records
VPS 3 – Valuation reports
VPS 4 – Bases of value, assumptions and special assumptions
VPS 5 – Valuation approaches and methods.

Global valuation technical and performance standards are denoted by the use of a VPS reference number and contain specific, mandatory (unless otherwise stated) requirements and related implementation guidance, directed to the provision of a valuation that is IVS-
compliant.

While VPS 1, 4 and 5 focus more on technical standards and VPS 2 and 3 focus more on performance and delivery standards, it would not be helpful to seek to categorise them further in any way. Instead their current order corresponds with that of the International
Valuation Standards, which the VPSs adopt and apply.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the advisory RICS global valuations practice guidance - applications?

A

The advisory RICS global valuation practice guidance - applications are:

VPGA 1 – Valuation for inclusion in financial statements
VPGA 2 – Valuation of interests for secured lending
VPGA 3 – Valuation of businesses and business interests
VPGA 4 – Valuation of individual trade related properties
VPGA 5 – Valuation of plant and equipment
VPGA 6 – Valuation of intangible assets
VPGA 7 – Valuation of personal property, including arts and antiques
VPGA 8 – Valuation of real property interests
VPGA 9 – Identification of portfolios, collections and groups of properties
VPGA 10 – Matters that may give rise to material valuation uncertainty.

RICS valuation practice guidance – applications are denoted by the use of a VPGA reference number and provide further implementation guidance in the specific instances listed. Thus, among the topics covered, they include valuations for specific purposes (of which financial reporting and secured lending are among the most widely encountered), and valuations of certain specific asset types, where particular issues and/or practical considerations expressly need to be taken into account. These VPGAs embody ‘best practice’ – that is procedures that in the opinion of RICS meet a high standard of professional competence.

While not themselves mandatory, the VPGAs do include links and cross references to the material in the International Valuation Standards and to material in these global standards that is mandatory. This is intended to assist members in identifying material relevant to the
particular valuation assignment they are undertaking.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is an assumption?

A

An assumption is - a supposition taken to be true. It involves facts, conditions or situations affecting the subject of, or approach to, a valuation that, by agreement, do not need to be verified by the valuer as part of the valuation process.

Typically, an assumption is made where specific investigation by the valuer is not required in order to prove that something is true.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is the basis of value?

A

Basis of value is - a statement of the fundamental measurement assumptions of a valuation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is a cost approach?

A

A cost approach is - an approach that provides an indication of value using the economic principle that a buyer will pay no more for an asset than the cost to obtain an asset of equal utility, whether by purchase or construction.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is a departure?

A

A departure is - special circumstances where the mandatory application of the global standards may be inappropriate or impractical.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is depreciated replacement cost (DRC)?

A

Depreciated replacement cost (DRC) is - the current cost of replacing an asset with its modern equivalent asset less deductions for physical deterioration and all relevant forms of obsolescence
and optimisation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is equitable value?

A

Equitable value is - the estimated price for the transfer of an asset or liability between identified knowledgeable and willing parties that reflects the respective interests of those parties.

Although in many cases the price that is fair between two parties will equate to that obtainable in the market, there will be cases where the assessment of Equitable Value will involve taking into account matters that have to be disregarded in the assessment of Market Value, such as certain elements of Synergistic Value arising because of the combination of the interests.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is an external valuer?

A

An external valuer is - a valuer who, together with any associates, has no material links with the client, an agent acting on behalf of the client or the subject of the assignment.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is fair value?

A

Fair value is - the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.’ (This definition derives from International Financial Reporting Standards IFRS 13.)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What are financial statements?

A

Financial Statements are - written statements of the financial position of a person or a corporate entity, and formal financial records of prescribed content and form. These are published to provide information to a wide variety of unspecified third party users. Financial statements carry a measure of public accountability that is developed within a regulatory framework of accounting standards and the law

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is income approach?

A

Income approach is - an approach that provides an indication of value by converting future cash flows to a single current capital value.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What are the International Financial Reporting

Standards (IFRS)?

A

International Financial Reporting Standards (IFRS) are -standards set by the International Accounting Standards Board (IASB) with the objective of achieving uniformity in accounting principles. The standards are developed within a conceptual framework so that elements of financial statements are identified and treated in a manner that is universally applicable.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is an investment property?

A

An investment property is - property that is land or a building, or part of a building, or both, held by the owner to earn rentals or for capital appreciation, or both, rather than for:

A: use in the production or supply of goods or services,

or for administrative purposes, or

B: sale in the ordinary course of business.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is PS 1?

A

PS 1 - Compliance with standards where a written valuation is provided

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is PS 2?

A

PS 2 - Ethics, competency, objectivity and disclosures.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is VPS 1?

A

VPS 1 – Terms of engagement (scope of work)

24
Q

What is VPS 2?

A

VPS 2 – Inspections, investigations and records

25
Q

What is VPS 3?

A

VPS 3 – Valuation reports

26
Q

What is VPS 4?

A

VPS 4 – Bases of value, assumptions and special assumptions

27
Q

What is VPS 5?

A

VPS 5 – Valuation approaches and methods.

28
Q

What is VPGA 1?

A

VPGA 1 – Valuation for inclusion in financial statements

29
Q

What is VPGA 2?

A

VPGA 2 – Valuation of interests for secured lending

30
Q

What is VPGA 3?

A

VPGA 3 – Valuation of businesses and business interests

31
Q

What is VPGA 4?

A

VPGA 4 – Valuation of individual trade related properties

32
Q

What is VPGA 5?

A

VPGA 5 – Valuation of plant and equipment

33
Q

What is VPGA 6?

A

VPGA 6 – Valuation of intangible assets

34
Q

What is VPGA 7?

A

VPGA 7 – Valuation of personal property, including arts and antiques

35
Q

What is VPGA 8?

A

VPGA 8 – Valuation of real property interests

36
Q

What is VPGA 9?

A

VPGA 9 – Identification of portfolios, collections and groups of properties

37
Q

What is VPGA 10?

A

VPGA 10 – Matters that may give rise to material valuation uncertainty.

38
Q

What is market approach?

A

Market approach is:

An approach that provides an indication of value by comparing the subject asset with identical or similar assets for which price information is available.

39
Q

What is market rent (MR)?

A

Market rent (MR) is:

The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion

40
Q

What is market value (MV)?

A

Market Value is:

The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each
acted knowledgeably, prudently and without compulsion

41
Q

What is marriage value?

A

Marriage value is:

An additional element of value created by the combination of two or more assets or interests where the combined value is more than the sum of the separate values.

42
Q

What is personal property?

A

Personal property is:

Personal property means assets (or liabilities) not permanently attached to land or buildings:

including, but not limited to, fine and decorative arts, antiques, paintings, gems and jewellery, collectables, fixtures and furnishings, and other general contents

excluding trade fixtures and fittings, plant and equipment,
businesses or business interests, or intangible assets.

43
Q

What is real estate?

A

Real Estate is:

Land and all things that are a natural part of the land (e.g. trees, minerals) and things that have been attached to the land (e.g. buildings and site improvements) and all permanent building attachments (e.g. mechanical
and electrical plant providing services to a building), that are both below
and above the ground.

44
Q

What is a special assumption?

A

A special assumption is:

An assumption that either assumes facts that differ from the actual facts existing at the valuation date or that would not be made by a typical market participant in a transaction on the valuation date.

45
Q

What is a special purchaser?

A

A special purchaser is:

A particular buyer for whom a particular asset has a special value because of advantages arising from its ownership that would not be available to other buyers in a market.

46
Q

What is special value?

A

Special value is:

An amount that reflects particular attributes of an asset that are only of value to a special purchaser.

47
Q

What is a specialised property?

A

A specialised property is:

A property that is rarely, if ever, sold in the market, except by way of a sale of the business or entity of which it is part, due to the uniqueness arising from its specialised nature and design, its configuration, size, location or
otherwise.

48
Q

What is sustainability?

A

Sustainability is:

Sustainability is, for the purpose of these standards, taken to mean the consideration of matters such as (but not restricted to) environment and climate change, health and well-being and corporate responsibility that can or do impact on the valuation of an asset. In broad terms it is a desire to carry out activities without depleting resources or having harmful impacts.

(Note: There is, as yet, no universally recognised and globally adopted definition of ‘sustainability’, and therefore members should exercise caution over the use of the term without additional explanation.)

49
Q

What is a trade related property?

A

A trade related property is:

Any type of real property designed for a specific type of business where the property value reflects the trading potential for that business.

50
Q

What is trading stock?

A

Trading stock is:

Stock held for sale in the ordinary course of business, for example, in relation to property, land and buildings held for sale by builders and development companies.

51
Q

What is a valuation?

A

A valuation is:

An opinion of the value of an asset or liability on a stated basis, at a specified date. Unless limitations are agreed in the terms of engagement this will be provided after an inspection, and any further investigations and enquiries that are appropriate, having regard to the nature of the asset and the purpose of the valuation.

52
Q

What is the valuation date?

A

The valuation date is:

The date on which the opinion of value applies. The valuation date should also include the time at which it applies if the value of the type of asset can change materially in the course of a single day.

53
Q

What are standards as set out in the Red Book?

A

Standards are mandatory

54
Q

What are the mandatory standards?

A

The mandatory standards are:

The International Valuation Standards (IVS) as issued by the International Valuation Standards Council (IVSC).

RICS professional standards – denoted by the prefix PS.

RICS valuation technical and performance standards – denoted by the prefix VPS.

Note - The IVS are adopted and applied by RICS in Red Book Global Standards

55
Q

What is guidance as set out in the Red Book?

A

Guidance is advisory but best practice

56
Q

What are the guidance advisories?

A

Guidance advisory:

RICS valuation practice guidance applications
– denoted by the prefix VPGA.

VPGAs are advisory and not mandatory in content. However, they alert members (where appropriate)
to relevant mandatory material contained elsewhere in Red Book Global, including to the relevant IVS, by the inclusion of appropriate cross-references.